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Tough decisions needed to protect progress while living within our means

January 27, 2008

With the national economy sputtering and the financial markets taking a hit, there has been a growing concern about revenue and state budgets. The economic slow down usually triggers slower revenue collection, and therefore less money for vital services like education and public safety.


Now we know exactly how tough it is going to be. Last week the Legislative Fiscal Office, the agency of the House and Senate that makes revenue predictions and reviews all state spending, gave us the bad news. For 2009, they estimated we are starting out in an $800 million hole. LFO estimates tax receipts next year will be $500 million less than what our education budget is for 2008, and $300 million less than the 2008 budget in the state General Fund.


These deficits must be eliminated in the 2009 budget, they cannot be passed on nor money borrowed to cover the shortfall. People have often asked why state government doesn’t do what they often do in Washington and just run a deficit. That is impossible for two reasons.


First, the Alabama Constitution prohibits state government from running a deficit or borrowing money for current operating expenses, we can only use what is brought in through the Alabama Department of Revenue. For years, President Bush and Congress could run deficits because the federal government borrowed money by selling bonds. While Democrats are now putting in new systems like pay-as-you-go budgeting, it will take years to get back to budget surpluses like we had in the 1990s.


After looking at the fiscal mess in Washington, I know it is a blessing that we can’t borrow money.  That leads me to the second reason why we can’t run a deficit in state government--it is just plain wrong. What household can survive running on credit cards year after year? One of the reasons for the problems in the economy is that borrowing got out of hand and now there is a credit crunch. Governments, just like families, need to live within their means. That is what Alabama state government does every year.


So that is what we face as we begin the legislative session on February 5--a real need to trim budgets while making sure vital programs and efforts are protected.


Let’s take education for example. We have made great strides in achievement in Alabama schools, and that is due to proper investment in our teachers and programs that work, like the Alabama Reading Initiative. We must make sure that cuts don’t affect the classroom.


Education revenue is down, especially corporate income taxes. The past several years we were able save considerable funds in the state rainy-day accounts to cover this year’s shortfall and some for next. Yet we will have to look long and hard at the school budget to find some combination of reduction in newer programs and cost savings in existing efforts. The cost of everything from transportation to textbooks has gone up dramatically, and we’ll need to look everywhere we can to find savings.


The budget demands on the General Fund, especially in health care, continue to skyrocket as revenue falls short. We need increases in prison guards, child protection services, and infant mortality prevention. Yet we are in serious jeopardy of not being able to afford what we already fund. 


The one thing every one can agree on is that raising taxes on working families is not up for discussion. Our state unemployment rate is at historic lows, major companies continue to expand here, and so the hope is the state economy will bounce back even faster than the rest of the nation. Yet tough decisions will have to be made in order to protect the progress we’ve made while living within our means. It should be an interesting session.